Company produces no defective machines, but it wants to reduce direct materials usage per D4H machine in 2013. Conversion costs in each year depend on production capacity defined in terms of D4H units that can be produced, not the actual units produced. Selling and customer-service costs depend on the number of customers that Company can support, not the actual number of customers it serves. Company has 75 customers in 2012 and 80 customers in 2013.

Required:

1.Calculate the operating income of Stanmore Corporation in 2012 and 2013.

1. Units of D4H produced and sold 2. Selling price 3. Direct materials (kilograms) 4. Direct material cost per kilogram 5. Manufacturing capacity in units of D4H 6. Total conversion costs 7. Conversion cost per unit of capacity (row 6 row 5) 8. Selling and customer-service capacity 9. Total selling and customer-service costs 10. Selling and customer-service capacity cost per customer (row 9 row 8) 2012 2013 200 210 $40,000 $42,000 300,000 310,000 $8 $8.50 250 250 $2,000,000 $2,025,000 $8,000 $8,100 100 customers $1,000,000 $10,000 95 customers $940,500 $9,900